Business Administration
Management
International Relations
Economy
International Trade

20 Ocak 2013 Pazar

How Do the US Companies Affect US Economy?

‘’ How Do the US Companies Affect US Economy? ‘’

‘’ How do International Outsource and Foreign Direct
Investment Affect US Economy? ‘’

Introduction

Economic aspects of globalization,
financial flows, trade, technology exchange, outsource, foreign direct
investment with the knowledge and the mobility of the workforce through the
integration of world economies to each other can be defined as.

Economic globalization and the rapid
worldwide spread of technology, goods and services cross-border transactions
have become increasingly diverse. World Bank, IMF, WTO, GATT, organizations
such as telecommunications, information and transportation technologies to make
rapid advances and cross-border sales, which aims to reduce the cost to provide
inexpensive sources of international companies, the main factors of economic
globalization, the environment is prepared.

Economic sense, globalization is
necessary to pay particular attention to two points. The first of these capital
movements. Thanks to globalization capital flows has a great fluidity and it
has been integrated into world financial markets to each other for the first
time in history. The best example of financial markets is that the daily volume
of more than $ 1.5 trillion. However, this great capital, changed hands
rapidly, causing a decrease in the real economy is also increasingly shared.
This is also the cause of decline in the shares allocated to production.

The second important point is that
international companies. Although the number does not exceed several hundred in
the 1970s, now numbers over 40,000 s to find the multi-national corporations,
the global economy have become the most important pillar. Turnover of 200 major
companies across the world, is more than a quarter of the entire world's
economic activity, given the subject easier to understand how serious. General
Motors' turnover reached more than Denmark's GNP.

Sum up, I would like to explain how many
company type we have and what are they.

1. International Company: After moving to a country a strong central based
management system, and settled in other countries trying to enter the company.

2. Multinational Company: Executives to
be able to profit distributing company resources, regardless of the identity of
the country, without distinction between domestic and foreign operating
company.

3. Transnational Company: International
business sense or can be passed beyond the limits of transnational and
multinational enterprises, political, economic and even ideological boundaries
that did not recognize, a multinational company with people from different nationalities
such as the organization adopted and developed by the company management.

4. Supranationalism Company: There is no
country was founded by an international agreement does not exist and, before
the registration of an organization that is connected to this organization and
control, and tax firm that was founded in this country, you will get held by
the organization, the company will lose the nationality law.

Firstly, I should explain some
definition. I would like start with ‘’ outsourcing ‘’ because it is the most
popular one for American company. They like it because of more profit. "The American Heritage Foundation,"
glossary "outsourcing" word "in some parts, such as motor
vehicles used in the manufacture of products and services, in order to reduce
costs, foreign suppliers or manufacturers to supply" is defined as.

Today, the 15-20% of total costs of
service items is estimated. "Outsourcing" activities, corporate
support units held marketing, human resources, accounting, purchasing,
financing and service activities in many fields such as customer relationship
management to be provided from outside, through the cost savings that have
emerged in order to go.

Previously, "outsourcing"
services through the purchases of the country, offering a relatively cheap
labor region, were made. However, especially in information technologies (IT
Services) as a result of the rapid growth opportunities offered by the U.S.
firms in the country they previously carried overseas purchases of contracted
service. For example, "Bank of America" company, an Indian company in
India, previously made ​​their own units, transfer function of the software
development for banking operations "offshore outsourcing"
(cross-border outsourcing) is defined as.[1]

The main objective of the Multinational
companies world-wide economic activity in a universal manner to maximize profit
is to integrate and organize; global company an organic structure which is
expected to each part of the service. Another reason for the Company's
activities into multinational become the most important customer outside the
company wants to watch. For example, Volkswagen decided to produce the famous
vehicles in the U.S. and many German car parts maker, glass, frame material,
brake assembly and parts for diesel injection pumps has led to establish a
facility in the U.S. to produce. These one opposite because generally Americans
brand establish factory or do outsource because of cheap labor and export the
other country easy transportation with oversea countries. But this German brand
is so they set up a factory for geographic and wants to watch customer in
position.

Benefits
of Globalization on Multinational Enterprises

Five-way multi-national enterprises have
shown benefits of globalization as a basis:

A. Speed: Globalization and the removal
of walls between national markets, has given businesses greater speed. Thanks
to globalization, multinational corporations have had a chance to enter
different markets, different products constantly.

B. Reducing Costs: Decreasing the
differences between markets, businesses provided great benefits in terms of
reducing costs. The low-cost entry to the business standards of globalization,
no matter where in the world, have had a chance to achieve. Globalization has
also a decline in distribution costs. Points of distribution and manufacturing
businesses that no longer make the minimum production costs.

C. Standardization: Globalization in the
different national markets, combined with consumers by identifying a common
denominator, for these segments led to the introduction of standard products
and services. This multi-national businesses, in each national market were
rescued from the obligation to respond to the needs of different audiences and
different. For example, upper-income target audience of young consumers who
choose to be a multinational enterprise, their partner's needs, tastes and
preferences have the chance to make the production of goods and services for.
In this way the audience will have some common characteristics and standardized
according to this definition applies to everyone who will be able to deliver
shared services.

D. Deployment Activities: Business,
various activities according to the local advantages, has the chance for
distributing the various geographic regions. After globalization, multinational
corporations, receiving entries from any country of their production to another
country, and sell their products elsewhere in the management of all of these
functions have the chance to make another country. However, this distribution
can be co-ordinate and co-ordination and integration is required to function
without any problems.

E. Centralization: Centralization, as
already mentioned provides co-ordination of activities which are necessary for
the healthy operation of the act of distributing. Emerging technology is no
longer a single center management can be made. Business activity spread over a
geographical location that covers much of the country, even in terms of
computers, video conferencing, internet, and so on. Technology provides the
performance of management in a single headquarters.

In
This Global Century Two Countries are so Popular for Outsourcing

First one is China. Capital of China is
Beijing and this country population biggest force for business and it affects
price number of population is 1.3 billion. Major Technical Centers are Beijing,
Guangzhou and Shanghai. We can see details below:

Labor Pool: China's technical schools
turn out 50,000 graduates annually, many of whom migrate west. Those who stay generally
don't speak English.
Costs: IT salaries range from $3,000 to $8,000 annually. No real BPO
competency.
Government: China's government has hampered growth due to trade policies and
overregulation; intellectual property concerns linger. The hope is that these
issues will evaporate as China blends into the World Trade Organization.

Infrastructure: Infrastructure can be spotty outside major cities, but China is
building networks, particularly telecommunications, almost as fast as the U.S.
Expertise: Transaction processing, low-end software development and
maintenance.
Major U.S. Customers: HSBC, Microsoft.[2]

Second country is India. Capital of
India is New Delhi and this country population is 1 billion.
Major Technical Centers are Bangalore, Chennai and New Delhi. We can see
details below:

Labor Pool: India has many prestigious
technical universities, but the Indian Institute of Technology stands apart as
one of the world's best. India produces 75,000 IT graduates and 2 million
English-speaking graduates’ annually.

Costs: Labor costs have crept upward over the years but have been offset by
falling telecom rates. Typical salaries range from $5,000 to $12,000 for
technical staff, while back-office salaries range from $3,500 to $7,500.

Government: Outsourcing is so ingrained in the fabric here that the Indian
government has a national minister specifically for IT. The government favors
IT foreign ownership and imposes no export taxes.
Infrastructure: With redundant telecom and utility infrastructure, there is
very good reliability within India's special IT parks. Reliability can be
spotty outside the parks or in more remote areas.
Expertise: Application development, maintenance, call centers, financial
processing. Experts see India becoming a hotbed for more critical analytical
jobs.
Major U.S. Customers: Citigroup, GE Capital and American Express have a very
large presence and have set up their own centers here.[3]

India, China and Russia and the
Philippines are the most conspicuous examples. For example, universities in
India alone approximately 200,000 new graduates each year are in the field of
information technologies. Founded in 1950 in India Institutes of Technology,
leaning heavily on high-technology programs in this field and prepared to train
qualified personnel, software technology parks in the late '80s (software
technology parks) was established. However, on Obtain an adequate development
of the Indian companies became more strategic international cooperation, to be
the dominant language in English, with opportunities for educated and cheap
labor diasporas connections, were the cornerstones of success today. Today
Bangalore, the software (software) business, "Silicon Valley" has
become compared to that.

Global
Companies in China

China's socialist reforms and management
approach in China, but also in the context of free market economy is organized
to live with the terms of the new dual structure, but especially the poor and
the unemployed population of large and also high in the world, re-reduction of
production costs make production much cheaper to a ready market conditions to
create a new and cheaper production. Although China did not show an equal
distribution of the Chinese who want to harness the power of leverage to employ
a part of many companies, large and small, to make their own behalf, and to
make production, and to have a part to do contract manufacturing for other
companies, who outsource their behalf have flocked to China for production.
Motorola, General Motors Corp., Ford Motor Co., Toyota Motor Corp., Volkswagen
AG, Audi Group, Renault Group, and so on. Many large investors to make
investments in China in the world, carries out production. Thus, China, cheap
labor, cheap raw material, capacity, and large market potential for new
investment areas, the organizational structure of the global network
organizations as part of the world, a large export ratio of world exports in
statistics has been growing very fast. In fact, it is subject to export
products, China's economy, not the geography of the Chinese economy that has
been produced, mainly westerners, including businesses owned by other
countries.

Apple
Incorporated in China

iPhones are designed and marketed by
Apple, one of the most innovative US companies. Apart from its software and
product design, the production of iPhones primarily takes place outside the
US. Manufacturing iPhones involves nine
companies, which are located in the PRC, the Republic of Korea (hereafter
Korea), Japan, Germany, and the US. The
major producers and suppliers of iPhone parts and components include Toshiba,
Samsung, Infineon, Broadcom, Numunyx, Murata, Dialog Semiconductor, Cirrius
Logic, etc. All iPhone components produced by these companies are shipped to
Foxconn, a company from Taipei, China located in Shenzhen, PRC, for assembly
into final products and then exported to the US and the rest of the world.
Table 1 lists major suppliers and costs of iPhone components and parts. The
manufacturing process of iPhones illustrates how the global production network
functions, why a developing country such as PRC can export high-tech goods at
least according to the currently applied methodology for calculating trade
statistic and why the country that invented the iPhone becomes an importer

China is with only the mounting base of
Apple's multi-national production chain to increase the U.S. trade deficit
cannot be said to be involved in many more. Apple's manufacturing processes are
determined in the center of the United States, price policy and the relevant
decisions are taken in the United States. One can take to resolve the imbalance
of foreign trade in China's decision to allow the Yuan appreciation. However,
even in case of appreciation of the Yuan, Apple may not allow the reflection of
prices, exchange rate changes.

iPhone in the U.S. instead of China is
said to increase the production cost of $ 65 per device. This difference in
terms of hardware cost of $ 178.96 dollars portion is equivalent to only 6.5.
China's exports to the United States to appear as the products sold in China is
completely against the U.S. and US-China trade balance in spite of ruin, TEPAV
according to research, in 2009 China's exports to the U.S. $ 2 billion only 73
million dollars for iPhone part stems from the value added created in China.

Sum up, lasting for months at a time
when the U.S. established manufacturing base in China, done in a few days. Most
hardware manufacturers should improve the procurement process and to be there.
Apple executives in the United States knows that this flexibility.

Labor costs are not one of the most important items in the expense of
electronic production. If Apple produces in the U.S. instead of China labor is
only 65 dollars on the iPhone will make a difference. This is not a financial
burden not afford Apple. Does not offer much cheaper labor in China as in the
past as well. But labor is so cheap nowadays, the production managed to
establish the chain of production of all the spare of the moment. China is now
in another country, price can be eaten, but fast and flexible production with
the 'know-how has become a country that is not easy.Technology
companies to establish production facilities in the United States for the
introduction of overseas sales tax exemption would create the source said. Tax
exemption can only provide additional revenue to Apple $ 8.2 billion.

Finally, I want to mention about how
China effects US employment. Because I told generally in a good way but this
report from: “Unfair China Trade Costs Local Jobs” by Robert Scott of Economic
Policy Institute. It is very important because of US citizens lost job for
Global American Companies use cheap labor force and geography. For this reason
recently years unemployment rate is dramatically increase.

The growing U.S. trade deficit with
China has cost jobs in every one of the nation’s congressional districts, the
study reported, including the District of Columbia and Puerto Rico. Between
2001 and 2010, the computer and electronic parts industry was hit the hardest,
as more than 909,400 jobs were displaced. The rapidly growing number of imports
of computer and electronic parts, including semiconductors and audio-video
equipment, accounted for more than 44 percent of the $194 billion increase in
the U.S. trade deficit with China during that time.[4]

The report cited other industrial
sectors hit hard due to the growth in the trade deficit with China between 2001
and 2010, including apparel and accessories (178,700 jobs), textile fabrics and
products (92,300), fabricated metal products (123,900), plastic and rubber
products (62,000), motor vehicles and parts (49,300), and miscellaneous
manufactured goods (119,700).

Outsourcing
in India

Information and communication technology
sector in India shows a remarkable improvement. Succeeded in creating a
profitable business areas of the ICT sector in India and it is fast becoming a
global supplier of software services, the most important continues to progress.
India has banking, insurance, technology, telecommunications, engineering and
multinational companies operating in areas such as business services that are
popular global production chain, manage call centers, financial accounting, and
database production has become an area they do. Because in India, trained
professional workforce, low labor costs and economic reforms started free
market for American and European companies. India today has become an
outsourcing haven. Information technology and business process outsourcing,
especially for Process led to the accumulation of deep experience.

Now the world's largest companies,
accounting, back office operations, call center, software, biotechnology,
medical tourism in India will request such services. The following 11 factors
behind India are outsourcing being a haven described in the header.

U.S., Britain, Canada, France,
especially in countries such as NASA and Microsoft technology and science,
generating hundreds of Indian employees is confronted with many institutions.
India, as an opportunity to evaluate the brain drain. Scientific institutions
in Western countries, the knowhow and experience the rich know-how and
technology transfer to India as the brains of winning are reversed.[5]

US will produce a large amount of human
capital equipped with a great education, whereas this is not enough. Countries
like India to join the world market and to reduce the production of American
mathematics and science education system to be educated workforce at a time
with an extreme has emerged to outsource jobs abroad. So the other reason is
that companies outsource jobs abroad, the size and quality of accessible labor
market.

Bank
of America in India

Bank of America is the biggest bank in
US. They have many branches in US. This is a bank it isn’t not like Apple that
they can use outsourcing. Because Apple manufactures in China. This brand
iphone, ipad, mac book, laptop broadly computer and smart phone. Thus they can
reduce labor cost and they can use geographic factors for import and export.
Bank of America in US so they don’t care geographic factors and it is finance
sector they don’t manufacturer how can they outsource something. But you forget something. Communication area
which you forgot it. Because yes we use via internet our account and in US
internet is the most popular but people don’t want write via e mail when they
lost card or same problem. They want to speak so person. Call center sectors
are growing last days. And Bank of America use two languages. First one is
English and second one is Spanish. For English they use outsourcing in India.
Theoretical you are in Ohio and you lost your card when you call the Bank of
America number you are speaking smooth English but the person from India and he
answers you in Mumbai via internet he help you like he is in states. Why has
Bank of America chosen India? Firstly, India government 10-year tax exemption
and exemption from customs duty is applied. The state provides tax relief in
international communication. Telecom liberalization is going. Finding supports
the activities of private investors. Up to 15% of fixed investments are
encouraged. Creating free trade zones with tax exemption of State encourages
the establishment of call centers here. Call centers of all kinds to move
software, office duty free entry brings to the instrument. Annual $ 3,000 a
year per person $ 1,000 state representatives winning customer support. Local
governments are supporting the establishment of technology parks. Allows the
establishment of advanced telecom infrastructure (Software Technology Parks).[6] The first service in large amounts to
outsource the software industry. Basic too big to easily transport data and
work products of the first importance, and it to accomplish very complex
communication equipment free. 1980 telecommunications equipment has dropped in
price substantially. In this case, developing countries, with the software
related trades only low-cost and low work has changed the concept of qualified
jobs. Encoded in the physical environment the data can be transmitted through
cables today. The amounts of outsourcing, has risen rapidly in volume. Even as
India developing countries, complex, high value-added software products can be
outsourced. India, superior in terms of cost in developed countries or the previously,
for the production of India.

Indian speaks better English than Chinese. That is why US has chosen India.
India's second largest English-speaking country after the United States. Have
access to the source of many people who can speak English in India India is one
of the advantages. In India, nearly 290 000-year engineering degree and diploma
holders participating in the labor force. India's abundant, high quality and
cost-effective services and large skilled labor source software, it amounts to
global software clients make it attractive.India
each year, with the ability to produce many high-skilled employees is emerging
as one of the best providers of IT resources. Multi-emphasis on science and
mathematics education system, science and engineering graduates in the field
results in too much. The quantitative dominance of English proficiency in
concepts, coupled with allowing the benefits of the existing international IT
demand caused the emergence of qualified employees. Government agencies such as
Indian Institute of Technology and Indian Institute of Management offer
qualified graduates each year.

How
does outsourcing effects Indian economy?

The importance of the sector
contributing significantly to export earnings appears more prominent. India is
estimated more than 25% of export earnings. In 58% of export earnings sector in
calculating the contribution of the Software, Business Process Outsourcing
(BPOBusiness Process Outsourcing)’s contribution is calculated as 27%. The
software and services sector, in India's total exports between 1996-2003 rose
by 3% to 21% in the Indian economy is increasingly important. Indian IT sector,
doubling the number of jobs added each year, the largest rise in employment
creation, growth occurs at a rate of increase in the number of side jobs and
high disposable incomes have contributed to the raising of a young consumer
class. IT-based services in India, India's economy has a very large multiplier
effect. Another direct effect on national income and employment, the sector also
grow a variety of industries to the side, an increase in direct tax revenues
and a rise in consumer spending due to significantly contribute to the high
disposable income.

Today, in India, it is not the same as
five years ago in India. Annual economic growths of 8% Indian businessmen
seeking business in the U.S. are investigating ways of establishing a business
in their own countries. Now with call centers in India are not only increasing
the business community all over the world also offers enhanced services such as
consulting and financial analysis. Intel, Microsoft, General Electric develops
and sells technology with companies such as Pfizer, GlaxoSmithKline, Merck, and
such a large and leading pharmaceutical companies, many of the tasks once done
by Americans, Indians to take advantage of cheaper labor. For example, an
Indian firm, Infosys, Fortune 500 companies to produce and maintain software
performs nearly 300. India's leading outsourcing service sector is undoubtedly
the most important reason for having a very large country with a population
that speaks English. The other hand, governments in India in recent years,
outsourcing some of their facilities for the development of India strengthened
its role as a pioneer in this field.

According to a survey conducted by the
year 2010 the number of people in India, 2.3 million people, outsourcing jobs
to run directly, indirectly, the number of people who work will be
approximately 6.5 million people. According to a survey of this work is the
same until 2010, India will be held around U.S. $ 60 billion in revenue to be
obtained. The report in question until 2010, and IT services outsourcing in
India is estimated that 44% of exports.[7]

On the other hand not only in
California, in 2000 there were 314 819 and most of them are Indians working in
the IT industry. However, these highly trained individuals with the rise in
unemployment in the United States less than half the salary they received in
the United States returned to their home countries. This situation has
contributed significantly to the development of outsourcing in India.

Conclusion

Nowadays, continues to increase even
more with each passing day, and the effects of
deepening process of globalization as a phenomenon to affect businesses and continues
to direct. Compared to the process of globalization to local businesses, we can
say that a different dimension in terms of multinational enterprises. From one
perspective with the process of globalization, multinational enterprises are
said to increase the requirements to return a structure, when viewed from the
other one is seen to play an active role in the process of globalization,
multinational enterprises themselves. This situation must be accepted as
natural. Because the reach of multinational companies operating in the fields
of economic size and diversity as a compelling factor in the process of
globalization, multinational companies pushing into. Favorable for the process
of globalization, a process that can be said that the multinational enterprises.
The process of globalization with the increasing liberalization trends, pushes
the borders between the countries are relatively more permeable structure. This
situation particularly in developing countries is higher. This information is
extremely important in terms of multinational enterprises, goods / services and
capital transfers make it easier. Thus, multinational firms sourcing, capital
transfers from foreign countries, and more importantly, they found
opportunities to be able to easily transfer their profits to their home
countries. In this respect, the process of globalization, multinational
enterprises in the global market makes an even stronger position. For this
reason, in this process as well as multinational corporations and the
globalization process is affected by the globalization process and enhancing
plays a role.

China accepted and established as market
network organizations in the world process of globalization of production and
other issues that should be taken into account, the differences in quality of
products with the same brand and function of different parts of the world,
different prices is presented. The company with the same brand, which is more
experienced in producing a portion of production and can produce much higher
quality 'businesses in developing countries' making, but the quality of
production as the top of the other part of the standard that can produce a lot
of products that caught no businesses in the country. This companies income
level and living standard of quality products, especially in developed
countries when selling to customers with high and low quality products with
potential customers in less developed countries and markets offer more
low-income and standard of living. Thus, the increased volume of quality through
a variety of products and markets are taking place. In fact, even in the
country of production, while sales of indigenous people, ‘they export goods’
sales with the introduction of the most obvious example of this are being
performed. In this case, in fact "quality" is a lifestyle-shaped
common.

Outsourcing, offers great opportunities
for many developing countries. The most important of these opportunities is the
creation the prestigious of employment opportunities for educated and young
population. In addition, the services offered abroad in the country with
knowledge and experience generated within the country also makes it possible to
create new markets.

India, with high information and normally the U.S., Europe and Japan are
expected to be a competitive advantage of IT and CT based Countries such as
areas such as software and services based on the combination of cheap labor
with advanced technology to upgrade the welfare of society and poverty in a
collective business model does not in dribs and drabs gained the opportunity to
a country. The most important thing to learn the success of India, even in the
less developed a country's development, "new ideas" and
"knowledge" played an important role in how to do.[8]

Borders between countries recent developments
in international trade has become completely unimportant because almost all the
advances in computer and communication technologies in the services sector
operations started to be in a paperless environment. This situation does not
change under normal circumstances, the rule of international free trade,
subject to the competitive advantage as a result of shifting to countries with
cheaper labor countries has resulted in expensive, and thus emerged as a
phenomenon is the globalization of local services. Subject to political
aspects, as well as the economic bears has become very popular recently.
Countries who use the service outsourcing industry, as well as in countries
engaged in various aspects are discussed and where this situation are discussed
who's winning. As a result of the globalization of local services is considered
as a global world economy, and it takes it a step further, and who makes these
services possible to say that all countries come out profitable.